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Government plans incentive fund for healthcare with corpus of over Rs 10,000 crore

NEW DELHI: The Centre is planning to set up an incentive fund for healthcare with a likely corpus of more than Rs 10,000 crore to provide additional assistance to state governments for measures such as making available free medicines, creation of a public health cadre and intersectoral convergence. 

The National Advisory Council is yet to finalise the corpus of the fund aimed at universal health care across the country, a senior official said, adding that the fund would be partly financed as grant-in-aid and partly as a proportion of all the flagship central schemes for healthcare, including the National Rural Healthcare Mission. 

"There are many qualitative changes needed to improve the state of healthcare in the country and to increase the share of the sector to up to 2% of the GDP. This would include focus on primary healthcare and popularisation of generic drugs in a big way," said the official, who did not wish to be named. 

The Centre wants to encourage state governments to ensure compliance with the conditionalities and increase financial allocations to health from the state budget, the official said, adding, "The incentive fund could also be operated as an instrument of equity between states, where both performance and need are recognised in making decisions on allocation." 

The 12th Five-Year Plan document had earlier stated that there was a need for states to increase their expenditure on health at the same rate as the Centre and that it could only happen if the transfer of funds from the Centre to the states was made conditional upon a higher expenditure on health by the state governments. 

The average spending of all states on the healthcare sector has come down to 4.1% from 5% of the total expenditure two decades ago, and the contribution to overall expenditure on the sector, both from the Centre and the states, has come down to 69% from 80% over the same period. 

"It is a good idea to nudge the states to marginally increase their spending on health by at least 0.1% by linking it to financial incentive. However, considering the resource crunch and poor fiscal health of the states at present, it would be still a mammoth challenge to convince them," said Sakhtivel Selvaraj, health economist at the Public Health Foundation of India. 

"Linking performance indicators to spending can only show some results in the long-term over many years as reductions in health indices such as infant mortality rate cannot be attained overnight," Selvaraj added. 

As per the NAC working group on universal health coverage, public spending on health is projected to increase from the current level of 1.04% to 1.87% of 
GDP by 2017. This implies that the expenditures on health by the Centre should go up from 0.5% to 0.62% of GDP while the combined expenditure by the states should increase from about 1% of GDP to 1.25% of GDP.